CASE STUDY: PRIMARK - the Association of British ...
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CASE STUDY: PRIMARK The Corporate Impact of Human Rights Abuse and Effective Due Diligence Abstract Primark has refocused its corporate social responsibility in response to the deadly Rana Plaza tragedy, implementing key ethical initiatives to ensure supplier compliance with ethical standards and increased transparency surrounding employment practices. Human rights PR scandals have had a lasting impact on consumer perception of the Primark brand, illustrating the necessity of acting pre-emptively to mitigate latent risks within the supply chain. Primark’s prioritisation of worker rights through the reformation of their auditing process and application of meaningful due diligence has been largely successful in addressing supply chain human rights abuses, particularly where workers have been personally engaged to provide authentic testimony about working conditions. Primark has contributed significant resources to promoting sustainable sourcing, in a wider attempt to destigmatise the consumer notion that ‘fast fashion’ perpetuates unethical practices, and to make amends for historically poor labour practices. Introduction Jack Cohen, founder of Tesco’s, famously claimed that success in business is simple; “pile it high, sell it cheap”. Few companies reflect this philosophy more astutely than Primark. The high street fashion retailer, owned by Associated British Foods, has seen impressive increases in revenue over the last decade: from £1.6 billion in 2007 to £7.1 billion in 2017. Primark’s business model is responsible for the company’s rapid expansion. The ‘fast fashion’ trend popularised by the retailer has won over consumers through wholesale undercutting of high street competitors. Primark has become a driving force in the fashion industry. Where consumers are increasingly conscious of their spending, Primark’s universal appeal and accessibility have driven its UK fashion industry market share to 7%, second only to Marks and Spencer’s at 7.5%. Yet providing markedly cheaper garments - the price of a T-shirt as low as £2 - carries associated challenges for the Primark brand. The company has struggled to shake the pre-fixed consumer notion linking cheap products with unethical sourcing. This public perception, combined with a host of alleged human rights violations throughout the supply chain, has publicly represented Primark as either wilfully or negligently exploiting cheap labour to maximise their profits. This case study will provide an in-depth analysis of the damage caused by this perception to the Primark brand, and the subsequent steps Primark have taken to challenge this negative image by becoming more ethically responsible. Their response to the negative PR has overall been positive, demonstrating that proactive and meaningful due diligence to combat supply chain abuse can be both practical and realisable.
Corporate Overview Currently there are 362 Primark stores spanning 11 countries, employing over 68,000 people. Primark has been recently expanding into the US market, establishing their first store in Boston in 2015. The company has a diverse target demographic including students and other low disposable income groups. It has particular traction with women aged 16-24 (according to GlobalData, over half of this demographic have shopped at Primark this past year). Primark reacts to trends quickly and promotes seasonal items to ensure the relevancy of its products. Primark’s popularity with its target demographic is reflected in YouGov BrandIndex’s data, indicating that public perception of the brand is moving in the right direction. Among all respondents, Primark’s impression score (whether a customer has a positive impression of a brand) has risen from -0.9 to +2.7 since 2017 – the second largest improvement in score this year of any retail company. Moreover, with an Impression score of +11 among those earning less than £25,000, it’s no wonder Primark has dominated the retail industry. Due Diligence Processes In 2013, the deadly Rana Plaza building collapse in Bangladesh exposed the scope of human rights abuses within the retail industry, shining a light on unfair supplier practices and drawing attention to the corporate responsibility of companies to safeguard worker rights. The factory was used for manufacturing garments by 28 different brands, including Primark, and was plagued with a host of human rights abuse allegations, including suppression of unionisation, withholding of pay and gender inequity. Prior to the building collapse, some workers were threatened to continue work, despite mounting concerns about the structural integrity of the building after cracks appeared. While the commercial areas of the building were evacuated, industrial suppliers forced workers to continue their labour amid threats of withholding one month’s pay for absence. The subsequent collapse of the building resulted in the deaths of 1,138 workers and injuring a further 2,000, marking the most lethal structural failure accident in modern history. These entirely preventable deaths on such a massive scale represent a salient symbol of how fashion retailers had lost control of their supply chains in pursuit of increasingly cheap overseas labour. The response by Primark to the tragedy was initially mixed. They were heavily criticised when it was revealed that the meagre $200 compensation they offered to families of the deceased could only be claimed if DNA evidence of their relative’s death could be supplied. Unsurprisingly, this unsympathetic approach did little to mitigate the strong public backlash against the company. Subsequent protests outside the Primark store in Oxford Street demanding effective action contributed to a wave of negative consumer opinion surrounding the Primark brand.
YouGov BrandIndex measures a company’s Buzz scores (whether people have heard anything
positive or negative about a brand in the past 2 weeks), and Attention scores (measures recent
awareness of the brand, regardless of sentiment).
Prior to the disaster, Primark had a Buzz score of +1.7. Two
weeks following the disaster the Buzz score plummeted to
-20.8, with their Attention score peaking at 35.6. These results
evidence the largely negative public image of the Primark brand,
with the high Attention score implying this was a belief shared
across the consumer base.
Two months later Primark had recovered reasonably well with a
Buzz score of -8.8. This was largely attributed to the company’s
re-structuring of due diligence processes and implementation of
key initiatives to protect against further abuses.
Primark suffered a huge impact on brand reputation following the 2013 Rana Plaza tragedy. Having
struggled to regain consumer confidence resulting from the 2008 BBC Panorama exposé revealing
the exploitation of child labour in the manufacture of Primark clothing, executives recognised the
need to be proactive in eliminating labour abuse and to be accountable for their supply chain
management.
It was unfortunate that it took a catastrophe of the scale of Rana Plaza to evoke meaningful action
on protection of worker rights. However, the speed with which Primark and other responsible retailers
mobilised to sign the Bangladesh Accord within 2 months of the disaster should be applauded. The
legally binding agreement, designed to build safe and fair working conditions for Bangladeshi
workers, has been universally praised as transformative and a key incentive for suppliers to raise
their ethical standards. The terms of the agreement mandate independent auditing programs, public
disclosure of all inspection reports, implementation of democratically-elected health and safety
committees in all factories, and empowering workers through a complaints mechanism and the right
to refuse unsafe work.
Primark have gone above and beyond the requirements of the
Bangladesh Accord, implementing complimentary policies to more
robustly tackle the systemic failures that led to the Rana Plaza tragedy.
Foremost, Primark developed its own Code of Conduct for suppliers to
adhere to. They stipulated ethical standards in conformity with the Ethical
Trade Initiative (ETI) Base Code and the ILO Declaration on Fundamental
Principles and Rights at Work. A Code of Conduct is a mere statement of
intent if not enforced; it is then simply a corporate formality. For this
reason, Primark took steps to ensure application of rights conferred by the
Code.
They partnered with local experts to more effectively operate in regions where an understanding of
cultural norms and practices was necessary. Given the high illiteracy rates of factory workers,
Primark has worked alongside local NGOs and designers to produce cartoon-style posters to
visualise the Code, and to communicate worker rights in a digestible manner.
In direct response to the Rana Plaza disaster, civil engineers are now an integral part of Primark’s
Ethical Trade team. They are routinely utilised to assess the structural integrity of factory buildings to
maintain health and safety standards. The expansion of their Ethical Trade team is a strong
indication of the seriousness with which Primark now addresses human rights abuses: from just two
members in 2007 to over 90 in 2018.
Media scrutiny following the Rana Plaza tragedy
has catalysed greater transparency within supply
chain management, refocusing the role and
responsibility of businesses to protect worker
rights. The ensuing PR crisis underlined the
importance of vocal participation in addressing
ethical concerns and in impacting public
perceptions of a brand. YouGov BrandIndex
attributes Primark’s fast recovery in their brand’s
health to their robust response to the Rana Plaza
crisis.
Primark’s failure to publicly report the
In pursuit of further transparency, Primark has findings of their audits does however
reformed its auditing process of supplier significantly undermine their efforts to
factories. During this process, confidential improve transparency and accountability.
worker interviews are undertaken to provide an Opaque inspections hidden from public
authentic perspective on labour conditions, scrutiny is a retrograde step in Primark’s
especially where supervisors create artificial efforts to become more ethically responsible.
environments to hide abuses. Confidential Their justification that it maintains the
interviews subvert a problematic aspect of ‘authenticity’ of their findings by protecting
auditing; workers under duress are not honest confidential interviewees does not hold up to
about their welfare through fear of repercussion. scrutiny; information enabling identification
Nevertheless, conducting periodic audits and of specific workers could easily be redacted
confidential interviews are insufficient when before publication. In consideration of
performed in isolation. These must be practised concerns surrounding competitive advantage
in conjunction with measures that protect and related issues of transparency with
workers year-round when there is no external supplier lists, the least that can be expected
oversight. This concern can most effectively be of companies is a transparent collaboration
addressed through supporting free and with independent NGOs and trade unions to
unsuppressed unionisation of workers. ensure findings of abuse detailed in audit
Collaborations with local trade unions would give reports are acted upon. This ensures a
workers a greater voice in their treatment; degree of accountability and assurance that
backed by the authority of the retailer, suppliers human rights violations are not being swept
would have less scope for abuse and castigation under the carpet, even if this precludes public
of workers. Primark has worked towards this end access to data.
through the ACT initiative, a combined effort with
other companies and the trade union IndustriALL This failing within Primark’s due diligence
to formalise the role of trade unions within the process was raised by the Corporate Human
retail industry, underpinned by the requirements Rights Benchmark 2017 report. While this
of the UN Guiding Principles. report acknowledged the work undertaken at
a policy level to mitigate worker abuse, it
criticised their lack of appropriate action
upon discovery of human rights violations
within the supply chain.
In 2016, Primark conducted 2,994 audits and over 100 impromptu ‘spot-checks’. Rigorous re- evaluation of the auditing process ensured the prioritisation of labour welfare. Through inspection reports, independent research and engagement with workers, key problem areas have been identified and addressed. All audits now include stringent checks for illegal or inhumane labour practices. Retention of identification papers or passports is prohibited, wages must be paid in full and on time, freedom of movement must not be suppressed, contracts must be written in the worker’s own language and explained clearly, worker agreement must not be obtained through duress or coercion, and worker rights must be made easily available. Moreover, it is pivotal that independent auditors are used and not those hired by the suppliers; this ensures impartiality and high monitoring standards. All supplier factories are audited prior to production to certify they meet the standards set out by the Code of Conduct. Furthermore, undisclosed sub- contracting is expressly forbidden as this places workers at significantly greater risk of exploitation due to lack of oversight and enforcement of ethical standards. Primark’s Modern Slavery statement, as required by the TISC provision in the Modern Slavery Act 2015, details their issues with excluding workers from the due diligence process and the importance of engaging them to develop a comprehensive assessment of working conditions. Primark have facilitated an open dialogue with workers through their Drawing The Line (DTL) initiative. This participatory tool seeks to highlight risk areas and problematic labour practices by gathering groups of workers and focusing discussion around their understanding of workplace rights and aspects of their employment. This holistic approach permits better informed due diligence and auditing processes. As a leading member of the Ethical Trade Initiative (ETI), Primark recognises that corporate social responsibility extends well beyond supplier compliance with ethical standards. Systemic initiatives must be implemented in conjunction with local schemes; one-size-fits-all policies rarely tackle culturally-specific issues effectively. To this effect, Primark has developed initiatives that directly address the most pressing concerns in specific regions. The most prominent is the Sustainable Cotton Programme launched in 2013, in collaboration with CottonConnect and the Self-Employed Women’s Association. This programme focuses on cotton production in Northern India and the endemically low access to education and training in the region. Further research underlined that this disproportionately affects women in the workforce, where gender discrimination underpins labour practices and remuneration for work. This long-term initiative was designed to engage labourers on the ground, with training focused on achieving sustainable and efficient cotton production to increase crop yield and pay for the workers.
The positive impact of the programme has prompted an expansion to support 10,000 more
farmers over the next five years, and the training of 5,000 new cotton farmers. The success of this
initiative is a testament as to how culturally-specific actions can have a greater impact than
generalised policy. It reaffirms the necessity of collaborating with local experts and NGOs to
ensure action is relevant and meaningful.
.
Efforts to empower the female workforce are
reinforced
having regard to cultural intricacies and targeting of specific issuesby a Farmer
is more Fieldthan
effective School
generalised
approach. implemented by Primark, an educational
service designed to teach sustainable farming
methods and management of an increased
cash flow. The programme has been
successful by all accounts. 1,251 female
farmers engaged with the programme in
2013.
By 2016, average profits for workers
increased by 247%, input costs reduced on
average by 19.4%, and there was a significant
decrease in the use of pesticides, fertilisers
and water usage.
Corporate and Social Benefits
The wider benefits of integrating human rights due diligence
in supply chain management are clear; safeguarding workers
from exploitation and securing protective labour standards
have a major impact on their livelihood and wellbeing.
Corporations have a social responsibility to investigate and
then mitigate any supply chain abuses. Pleading ignorance or
denying responsibility for supplier abuses is no excuse.
Responsibility extends beyond the welfare of labourers, also encompassing the community and
environmental impact of supply chain operations. The fashion industry is a major contributor to
pollution. Grossly inefficient and environmentally harmful manufacturing processes involving the
overuse of pesticides and chemicals contribute significantly to global warming. McKinsey and Co
estimated that for every kilogram of textiles produced, 23 kg of greenhouse gases are emitted.
Contextualised with the sheer number of garments produced - over 100 billion items annually
since 2014 - fashion retailers have a responsibility to curtail unsustainable practices and prevent
the acceleration of climate change. Understandably, companies have finite resources to commit
to due diligence and sustainability initiatives, but ethical considerations should play an important
role in corporate decision-making given the impact on people’s lives.
Primark’s Sustainable Cotton Programme It is imperative that latent risks should be
illustrates that prioritisation of human rights and acted upon pre-emptively to avoid the
sustainability does not have to come at possibility of scandal, as this will have a
significant business cost. Workers received lasting negative impact on the public
education, training and increased pay yet the perception of a brand. Reacting to human
company reaped the benefits from an increased rights abuses only after the media have
cotton yield and better quality products. highlighted them will ultimately do little to
Companies should view due diligence as a form revive positive perceptions. Indeed, this may
of risk management. From a corporate only be the tip of the iceberg. Media reports
perspective, it makes sense to identify and on poor labour practices can be a catalyst for
remedy potential risks that could develop into a further industry regulation, while unchecked
PR scandal and result in damaged brand human rights violations could result in costly
reputation. Human rights scandals are a hot civil lawsuits. In many contexts, sufficient
topic for media outlets. Being viewed as a due diligence will provide a satisfactory
company that perpetuates human rights abuses defence to a legal charge if it can be shown a
is hugely detrimental for their business and will company had taken all reasonable steps to
compromise their brand’s image long after the mitigate human rights abuses.
immediate fallout.
The corporate impact is particularly salient
This notion was corroborated by ‘Sustainability in when considering the consequence of
Corporate Communications and its Influence on increasing ethical awareness of consumers
Consumer Awareness and Perceptions: A study on their spending habits. Now more than
of H&M and Primark’. This investigation ever, consumers are making an active choice
contrasted consumer perceptions and about the companies they support and the
awareness of the ethical commitments of two practices they endorse. Recent polls suggest
leading UK retailers, Primark and H&M. Interview- a third of UK consumers claim to be very
based findings revealed that consumers concerned about the origins of their
perceived Primark’s online ethical products. A YouGov study in collaboration
communications to be credible, with genuine with the Global Poverty Project revealed that
intent to atone for past mistakes. By contrast, 74% of those surveyed would be willing to
H&M’s ethical initiatives appeared to consumers spend an extra 5% on their clothes if they
as disingenuous and motivated by a desire to could be guaranteed that the labourers
publicly appear ethically responsible rather than worked in safe conditions and received fair
a sincere attempt to prevent abuse in their supply pay. This is especially striking when it is
chains. Despite this criticism, the interviewees considered that if the fashion industry added
overwhelmingly found H&M to have a better just 1% of its profits to workers’ wages they
overall ethical image than Primark. Interestingly, could lift 125 million people out of poverty.
Primark’s reputation as an unethical business There is a growing spotlight on overseas
preceded them, notwithstanding their initiatives business operations. It is therefore in their
being considered more effective and honest. The competitive interests to respond to this trend
results indicate that pre-fixed consumer notions in sustainable consumption.
moulded by PR scandals prevail in determining a
company’s ethical image, regardless of future
endeavours to tackle abuse in their supply
chains.
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